Disney Continues to Invest in Streaming Battle
We are raising our fair value estimate to $140 from $127 due to much higher subscriber growth offset slightly by higher content spending.
Disney outlined an aggressive direct-to-consumer strategy at its investor day on Dec. 10 as the company appears to be taking the fight to Netflix globally. Disney also showed or discussed over 100 pieces of content that will stream on its DTC platforms over the next three years. As a result of its plans and content investment, management outlined a much higher outlook for Disney+, calling for 230 million-260 million subscribers by fiscal 2024, up considerably from the April 2019 forecast of 60 million-90 million. Even with 86.8 million current subscribers, Disney believes that Disney+ can triple in size over the next four fiscal years. We are raising our fair value estimate to $140 from $127 due to much higher subscriber growth offset slightly by higher content spending.
As part of its global battle with Netflix, Disney is launching a general entertainment content offering under the Star brand. Instead of a global standalone service, the Star content will be placed into Disney+ under a Star banner in Europe, Canada, Australia, New Zealand, and Singapore. Unlike Hulu, the U.S. content will only be sourced from the firm’s library and studios such as 20th Century and FX and supplemented with local language content. The new offering will launch on Feb. 23 with a EUR 2 price increase (to EUR 8 per month) with similar price increases outside Europe. The service will launch in other markets including Japan and South Korea later in 2021.
For Latin America, the same general entertainment content--with local-language programming--will be combined with live sports from ESPN, including soccer, under the Star+ brand for $7 per month beginning in June. The bundle of Star+ and Disney+ will cost roughly $9 per month. The pricing differential is low enough that we expect very few subscribers to sign up for just Star+. This bundled strategy is similar to the Disney+ Hotstar service that the company uses in India and Indonesia that now make up 30% of all Disney+ subscribers.
|Morningstar Premium Members gain exclusive access to our full analyst reports, including fair value estimates, bull and bear breakdowns, and risk analyses. Not a Premium Member? Get this and other reports immediately when you try Morningstar Premium free for 14 days.|
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.